Chapter 2 - Express Trusts: Constitution of Trusts Flashcards
What is needed for an express trust to be enforceable?
The settlor must:
a) make a valid declaration of trust
b) put assets into the trust
Once both steps ave been completed, the trust is said to be constituted.
What is an inter vivos trust?
An express lifetime trust.
What are the two methods of constituting a trust?
- The settlor appoints themselves trustee for the beneficiary by making a valid declaration of trust.
- The settlor appoints someone else to be the trustee by making a valid declaration of trust
What happens when the settlor declares themselves as trustee?
Prior to the declaration of trust, the settlor owned the property ABSOLUTELY- they held both legal and equitable title.
Following the declaration of trust, the settlor becomes the trustee.
The trust is validly constituted once the settlor validly declares themselves to be trustee.
What happens when the settlor appoints a third party to be trustee?
The settlor must take steps in order to put legal title into the trustees name.
How can a settlor transfer legal title regarding land?
They must:
- Execute a deed. The document must be stated to be a deed or signed as one. The person making the deed must sign it in front of a witness who also signs.
-the deed must be given to the land Registry or to the trustee to pass on to the Land Registry
The Land Registry will then register the new owner as the legal owner.
How can a settlor transfer legal title regarding shares?
WITHIN the CREST system
OUTSIDE the CREST system
Transferring shares WITHIN the CREST system
CREST is a computerised transfer system that requires no paperwork. They are generally managed by a Stockbroker, so the settlor will need to instruct the Stockbroker to make the transfer.
Transferring shares OUTSIDE the CREST system
Companies with Ltd or Limited in their names must register shares outside the CREST system.
All other shares are also registered this way.
a) Execute a Stock Transfer Form
b) Give the executed Stock Transfer Form and relevant share certificate to the trustee or send it to the new company direct.
The company’s secretary will then register the trustee as the new shareholder in the register of members
Transferring the legal title of money
Legal title to money generally passes on delivery.
Transferring the legal title of chattels
Chattels are anything tangible in nature. Title is generally passed with physical delivery or a deed.
Equitable Maxim: Equity Will Not Assist a Volunteer
Also known to be ‘equity will not perfect an imperfect gift’.
it follows that the transfer rules cannot be bent or overlooked in order to constitute a trust.
Exceptions to the maxim ‘equity will not assist a volunteer’
The Every Effort Test.
Where the settlor did everything they could to transfer legal title.
The settlor must have passed the point of no return.
What is the Rule in Strong v Bird
When someone dies, people are appointed as the executor or administrator of their estate.
If the settlor did not finish the transfer of legal title and their intended trustee is now their executor or administrator, they can complete the transfer, assuming they satisfy the four conditions.
What are the four conditions in Strong v Bird?
a) The settlor intended to create an immediate trust with a third party acting as trustee
b) the trust was not immediately created due to a failure to comply with a relevant transfer rule
c) the settlor’s intention continued up to their death; and
d) the intended trustee acquired legal title to the trust property by becoming the settlor’s executor or administrator.
